Badger Daylight (BADFF, Financial) is a Canadian excavator that gets the bulk of its revenues in the U.S. The stock is down with a loss of sales from the energy industry and has attracted an activist investor.
The company has 31.1 million shares, the stock trades for 24.03 Canadian dollars ($17.84), and the market cap is 747 million Canadian dollars. It takes 74 cents to buy one Canadian dollar. It pays of dividend of 3.3 cents Canadian monthly for a dividend yield of 1.65%. Diluted EPS are 78 cents Canadian, and the price-earnings (P/E) ratio is 30.8. Here is a link to an article on GuruFocus that notes that Wasatch International Growth has bought shares.
Revenues were 239.2 million Canadian dollars in 2012 and grew to 404.2 million Canadian dollars in 2016. It has been flat for the last two years and sales were 422 million Canadian dollars in 2014. EBITDA is 107.4 million Canadian dollars, and the EBITDA yield is 26.6%. Badger is profitable.
The balance sheet is strong. There are 63 million Canadian dollars in cash and 101 million Canadian dollars in debt. No problems there.
The term “daylighting” is when an excavator digs up pipes and exposes the pipes to daylight. Badger is North America’s largest daylighter. If you want to work for it part time in addition to your regular job, you’ll be moonlighting as a daylighter. It can pay for your nightlife.
The company’s trucks are amazing. Much of the excavation is done through high-pressure water. Also on the trucks are vacuums to remove rocks and debris.
Badger notes that the gas industry spends $19 billion a year fixing lines, that 240,000 water mains break a year, the Society of Civil Engineers estimates that we need to spend $3.6 trillion in infrastructure upgrades by 2020 and that 34,027 miles of pipelines are being planned for construction in North America. Maybe Badger can badger the Flint, Michigan, city council to hire it to fix Flint's water lines.
The company had 136 trucks in 2000 and now has 1,024. Each truck earns 27,000 Canadian dollars a month in revenues; 668 of its trucks are in the U.S. and 356 in Canada. The company has a goal of growing 10% to 15% per year organically in Canada and double its 2015 U.S. revenue by 2020. Growth has been sluggish for the last few years.
Badger has gotten beaten up with the fall in revenues from its energy division. The stock has tanked and drawn the attention of activist investor Marc Cohodes.
So here’s the question. Revenues have not grown without the energy sales, and oil and gas don’t look great. Can municipalities continue to send Badger business? What about municipal bond sales? That is where much infrastructure spending comes from. Badger is an interesting stock, but you need to understand where local governments will get revenues.
Disclosure: We do not own stock.
